Optimal Legal Status for Your Business in Malta

Published on October 1, 2025 and written by Cyril Jarnias

Malta, a small Mediterranean archipelago at the heart of the European Union, has become a sought-after destination for entrepreneurs worldwide. With its advantageous tax system and business-friendly regulatory framework, the island offers numerous opportunities for foreign investors. However, choosing the right legal structure for your business in Malta is a crucial decision that will significantly impact your operations. In this article, we will explore the different options available to you and guide you through this important choice.

Malta’s Strengths for Entrepreneurs

Before diving into the details of legal structures, it’s essential to understand why Malta attracts so many entrepreneurs. The island benefits from a strategic position in the heart of the Mediterranean, a skilled and English-speaking workforce, and a stable economic environment. Additionally, the country offers an attractive tax regime, with an effective tax rate that can go as low as 5% for international companies thanks to the tax refund system.

Malta is also recognized for its robust financial regulation and compliance with European standards, making it a safe choice for investors. In 2024, the island recorded economic growth of 3.2%, surpassing the EU average, demonstrating the vitality of its economy.

Main Legal Structures in Malta: Make the Right Choice!

In Malta, several legal forms are available for entrepreneurs. Each has its advantages and disadvantages, and the choice will depend on your business objectives, the size of your company, and your growth plans.

1. The Limited Liability Company (LLC): The Star of Maltese Businesses

The Limited Liability Company (LLC) is by far the most popular legal form in Malta. It offers great flexibility and limited liability for shareholders. Maltese LLCs can be private (with a maximum of 50 shareholders) or public (with no shareholder limit).

• Limited liability for shareholders
• Flexibility in management structure
• Ability to benefit from Malta’s advantageous tax system
• Relatively low minimum share capital (€1,165)

• Stricter reporting and compliance requirements than for sole proprietorships
• Higher formation and maintenance costs

2. The Partnership: Strength in Unity

The partnership is a form of business where two or more people join together to manage a company. In Malta, it can take the form of an ordinary partnership or a limited partnership.

• Simple formation and management
• Flexibility in profit distribution
• No minimum capital required

• Unlimited liability for partners (except for limited partners in a limited partnership)
• Less suitable for attracting external investors

3. The Branch: An Extension of Your Existing Business

If you already have a business abroad and want to expand your operations to Malta, setting up a branch can be an interesting option. A branch is not a separate legal entity, but an extension of the parent company.

• Simplified formation process
• No minimum capital required
• Ability to benefit from the parent company’s reputation

• The parent company is responsible for the branch’s debts and obligations
• Less autonomy compared to a subsidiary

Sole Proprietorship or Company: What to Choose in Malta?

The decision between creating a sole proprietorship or a company in Malta depends on several factors. Let’s examine the advantages and disadvantages of each option.

Sole Proprietorship: Simplicity and Autonomy

The sole proprietorship, or “sole trader” in English, is the simplest form to start a business in Malta. It’s particularly suitable for independent entrepreneurs or small businesses with limited revenue.

• Simple creation and management
• Low startup and operating costs
• Complete control over the business
• Fewer administrative and accounting requirements

• Unlimited liability: your personal assets can be seized in case of debts
• Difficulty raising funds or attracting investors
• Less professional image than a company

Company: Protection and Credibility

Opting for a company, particularly an LLC, offers many advantages, especially for businesses planning significant growth or wanting to attract investors.

• Limited liability for shareholders
• Better image and credibility with partners and clients
• Easier to raise funds and attract investors
• Ability to benefit from Malta’s advantageous tax regime

• More complex and costly formation process
• More administrative and accounting requirements
• Less flexibility in daily management

In Malta, the trend clearly favors companies, particularly LLCs. In 2024, there were over 50,000 registered companies in Malta, with a large majority being LLCs, compared to only a few thousand sole proprietorships. This preference is explained by the tax benefits and protection offered by companies in the Maltese context.

Specifics of the Maltese Tax System: A Major Advantage

The Maltese tax system is one of the main attractions for foreign entrepreneurs. Understanding its specifics is essential for choosing the right legal structure for your business.

The Full Imputation System

Malta applies a unique full imputation system in Europe. Although the corporate tax rate is 35%, shareholders can benefit from a partial refund of the tax paid by the company when distributing dividends. This system can reduce the effective tax rate to 5% in some cases.

Tax Benefits for Companies

• Tax exemption on capital gains from qualifying holdings
• No withholding tax on dividends, interest, and royalties paid to non-residents
• Ability to benefit from Malta’s extensive network of tax treaties

Taxation of Sole Proprietorships

Sole proprietorships are taxed according to the progressive personal income tax scale, with rates ranging from 0% to 35%. While this may seem less advantageous than the corporate regime, it can be more interesting for small businesses with modest income.

In 2024, the Maltese government introduced new tax measures aimed at encouraging innovation and investment, including tax credits for research and development and incentives for technology startups. These measures further strengthen Malta’s attractiveness for entrepreneurs.

Steps to Create Your Business in Malta: A Simplified Process

Regardless of the legal form chosen, creating a business in Malta is a relatively simple and quick process. Here are the main steps to follow:

1. Choose a Name for Your Business

Your business name must be unique and approved by the Malta Companies Registry. It’s recommended to check name availability before starting the registration process.

2. Prepare the Formation Documents

For an LLC, you’ll need to prepare the memorandum and articles of association. These documents must be drafted in English or Maltese.

3. Open a Bank Account

It’s necessary to open a bank account in Malta to deposit your business’s share capital.

4. Register with the Companies Registry

Registration is done with the Malta Business Registry. The average processing time is 2 to 3 business days.

5. Obtain Necessary Licenses

Depending on your activity, you might need specific licenses. For example, financial sector businesses must obtain a license from the Malta Financial Services Authority (MFSA).

6. Register with Tax and Social Security Authorities

Once your business is registered, you must register with the tax department and social security.

In 2024, Malta launched an online platform to simplify the business creation process. This initiative has reduced the average time to create a business to less than one week, placing Malta among the most efficient countries in Europe in terms of ease of business creation.

Conclusion: Making the Right Choice for Your Entrepreneurial Future in Malta

Choosing the right legal structure for your business in Malta is a crucial decision that will significantly impact your operations. The Limited Liability Company (LLC) remains the most popular and often most advantageous option, particularly for foreign entrepreneurs seeking to benefit from Malta’s advantageous tax regime.

However, each situation is unique. A sole proprietorship may be more suitable for small businesses or freelancers, while a branch may work for foreign companies wanting to establish themselves in Malta without creating a separate legal entity.

It’s essential to consider not only tax aspects but also legal implications, formation and maintenance costs, and your long-term objectives. A thorough analysis of your specific situation, ideally with the help of a local expert, will allow you to make the most informed choice.

Malta offers a business-friendly environment with advantageous taxation, favorable regulation, and a strategic position at the heart of Europe. By choosing the right legal structure and following the appropriate procedures, you’ll be well positioned to succeed in your entrepreneurial adventure on this dynamic Mediterranean island.